As we approach the date of the Ethereum merger, users are speculating about what it will mean for projects and the wider ecosystem. Some say the merger will have little impact on gas charges and believe transaction speeds could improve.
However, normal users will usually not notice many changes. The real changes for average users will only be visible after the shaving mechanism is introduced, six months later.
Fusion will reduce energy consumption and increase safety
The merge is an update to the Ethereum network scheduled for September 15th. It will move transaction validation from proof of work (PoW) to proof of promise (PoS). PoS has been part of Ethereum’s plans for years, but the level of technical sophistication it requires has taken time to develop. It involves a transfer from miners responsible for validating blocks to ETH owners.
Also read: How could a sharding-based blockchain process more transactions than Visa?
This development will have some important long-term consequences. First, it will lead to a significant reduction in the amount of electricity used by Ethereum (up to 99.9%). Although PoW is a very efficient method of validation, it has been shown to use the same amounts of electricity as entire countries, which means it is very harmful to the environment.
With PoS, collectors will only have to accept 32 ether (ETH). This change will also result in improved security. Basically, it reduces the risk of an attack to 51% (required to gain control of the network), which is most likely on a PoW system. On a PoS system, it is the ETH that is at risk of launching an attack – rather than the cost of electricity on a PoW system – so there is an inherent penalty for failure.
While a failed PoW attack results in lost electricity costs, cutting off the collector’s share is equivalent to PoS and a miner burning an entire farm of PoW servers in a failed attack. The economic incentive is greatly reduced. The merger will also balance out the economy.
Don’t expect better speed or lower gas costs
At the moment, it does not require major efforts from the projects themselves to merge. However, the question remains about the impact of the merger on project users.
Many users have assumptions and guesses about how the system will change after the merger. But in reality, many of the assumptions are wrong.
Small impact on gas costs
The Ethereum Foundation, the organization behind the Ethereum blockchain, claimed that the merger will have little impact on gas fees. This means that gas costs will remain relatively high, depending on the demand and supply of computing power.
Speed improvement
The claim to improve transaction speed has been repeatedly denied by Ethereum developers. They claim that it depends on the application that uses the blockchain and not on the blockchain itself.
High fees for NFTs
To create a new non-fungible (NFT) token on the Ethereum network, you will need to pay a transaction fee. However, the switch from Ethereum’s current PoW consensus algorithm to the upcoming PoS system will not affect NFT creation fees.
Taking Rewards
Those whose cryptocurrencies are at stake will find that the rewards will remain locked. They will be locked until the Shanghai upgrade, which is the next big upgrade after Merge. At that time, new ETH will accumulate on Beacon Chain and remain locked for at least six to twelve months.
In general, normal users won’t notice much of a change, but there are a few things to consider.
The price of ETH is expected to rise
The price of ETH is expected to rise immediately after the Merger, partly due to the anticipation following Goerli’s success and a potential exposure hedging scheme. But the idea that ETH fees are burned as a result is a myth. Instead, unburned fees and execution level hints will be sent to stakeholders. Validators will receive 30% of the transaction fee.
Also read: Ethereum Merger On Track, Goerli Test Merger Completed Successfully
Commissions will remain the same, and withdrawals will not be made immediately
Much has been said about how the merger will change commissions, fees and withdrawals. However, these things are unlikely to happen before the next phase of network transformation. Many of these benefits will occur when Ethereum moves to the next phase of sharding updates. This is when commissions are likely to drop. Likewise, this is when users will be able to withdraw the merged ETH (a subject that has been the subject of considerable speculation).
A validator or out of sync could lead to blockchain bugs
For users who want to become collectors, there is a chance of bugs and blockchain being out of sync. The best thing to do is to take care to update clients and research the specific risks associated with consensus changes. But most of the features will happen automatically.
What does being ready for the merger look like?
While the merger was designed to have minimal impact on developers of smart contracts and decentralized applications, there are a few things developers should be aware of. Essentially, the merger is accompanied by changes in the level of consensus, which also includes changes related to factors such as:
- Block structure
- Time of slots/blocks
- Opcode changes
- Sources of hazards on the blockchain
- The safe-head concept
- Completed blocks.
So, if your application or service depends on a read block structure, you will need to update it. Any application that reads the state of the blockchain, such as a centralized exchange, must update its nodes. “Preparing” the project for the merger really means that the changes that occur during the merger should not affect the project’s customers in any way. However, the details of each project are unique. If the process goes smoothly, decentralized applications and services should not be affected, although Ethereum has never seen a comparable update in the past.
The next step in the process
Users will begin to see significant changes following planned post-merger upgrades, including the Shanghai hard fork, which will remove pledged funds and increase its scalability. Finally, in 2023, the trimming mechanism will be used. Sharding will further increase Ethereum bandwidth, as well as reduce network costs.
The merger holds great promise for the future, but it is only one step in a long process. Users need to understand it to reap the benefits and prepare for it.
Svyatoslav Dorofeev is the Chief Executive Officer of TheWatch. He is a cryptocurrency enthusiast with over 15 years of product development experience. He has launched and led products in various areas including OTT/IPTV, Gaming, Travel (OTT), e-commerce and Fintech. Before that he was chief product officer of one of the largest banks in Eastern Europe.
The views expressed are solely those of the author and do not necessarily reflect those of Cointelegraph. This article is intended for general information purposes and is not intended to be legal or investment advice and should not be considered.
